Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 8.10 To Remove the Attestation Filing Requirements in Connection With Trading Permit Holders' Policy and Procedures Regarding the Misuse of Material, Nonpublic Information, 71488-71491 [2019-27873]
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Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices
been complied with to the extent
necessary to complete the proposed
Substitutions.
2. The Insurance Company Applicants
or their affiliates will pay all expenses
and transaction costs of the proposed
Substitutions, including legal and
accounting expenses, any applicable
brokerage expenses and other fees and
expenses. No fees or charges will be
assessed to the Contract owners to effect
the proposed Substitutions. The
proposed Substitutions will not cause
the fees and charges under the Contracts
currently being paid by Contract owners
to be greater after the proposed
Substitution than before the proposed
Substitution. For each Substitution, the
combined current management fee and
Rule 12b–1 fee of the Destination Fund
at all asset levels will be no higher than
that of the corresponding Target Fund at
corresponding asset levels.
3. The proposed Substitutions will be
effected at the relative net asset values
of the respective shares in conformity
with section 22(c) of the Act and rule
22c–1 thereunder without the
imposition of any transfer or similar
charges by the Section 26 Applicants.
The proposed Substitutions will be
effected without change in the amount
or value of any Contracts held by
affected Contract owners.
4. The proposed Substitutions will in
no way alter the tax treatment of
affected Contract owners in connection
with their Contracts, and no tax liability
will arise for affected Contract owners
as a result of the proposed
Substitutions.
5. The rights or obligations of the
Insurance Company Applicants under
the Contracts of affected Contract
owners will not be altered in any way.
6. Affected Contract owners will be
permitted to make at least one transfer
of Contract value from the subaccount
investing in the Target Fund (before the
Substitution Date) or the Destination
Fund (after the Substitution Date) to any
other available Investment Option under
the Contract without charge for a period
beginning at least 30 days before the
Substitution Date through at least 30
days following the Substitution Date.
Except as described in any market
timing/short-term trading provisions of
the relevant prospectus, the Insurance
Company Applicants will not exercise
any right they may have under the
Contract to impose restrictions on
transfers between the subaccounts
under the Contracts, including
limitations on the future number of
transfers, for a period beginning at least
30 days before the Substitution Date
through at least 30 days following the
Substitution Date.
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18:44 Dec 26, 2019
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7. All affected Contract owners will be
notified, at least 30 days before the
Substitution Date about: (a) The
intended Substitution of the Target
Funds with the Destination Funds; (b)
the intended Substitution Date; and (c)
information with respect to transfers as
set forth in Condition 6 above. In
addition, Insurance Company
Applicants will deliver to all affected
Contract owners, at least 30 days before
the Substitution Date, a prospectus for
each applicable Destination Fund.
8. Insurance Company Applicants
will deliver to each affected Contract
owner within five (5) business days of
the Substitution Date a written
confirmation which will include: (a) A
confirmation that the proposed
Substitutions were carried out as
previously notified; (b) a restatement of
the information set forth in the
Supplements; and (c) before and after
account values.
9. The Section 26 Applicants will
cause AIM or PIMCO, as applicable, as
the investment adviser of each
Destination Fund, to enter into a written
contract with the applicable Destination
Funds, whereby, during the two (2)
years following the Substitution Date,
the annual net operating expenses of
each such Destination Fund will not
exceed, on an annualized basis, the
annual net operating expenses of any
corresponding Target Fund for fiscal
year 2018. The Section 26 Applicants
further agree that separate account
charges for any Contract owner on the
Substitution Date will not be increased
at any time during the two-year period
following the Substitution Date.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019–27917 Filed 12–26–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87806; File No. SR–CBOE–
2019–123]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Rule 8.10 To
Remove the Attestation Filing
Requirements in Connection With
Trading Permit Holders’ Policy and
Procedures Regarding the Misuse of
Material, Nonpublic Information
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
Frm 00141
Fmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
Rule 8.10 to remove the attestation filing
requirements in connection with
Trading Permit Holders’ (‘‘TPHs’’)
policy and procedures regarding the
misuse of material, nonpublic
information. The text of the proposed
rule change is provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegal
RegulatoryHome.aspx), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to remove the
Rule 8.10 requirement that TPHs that
file only annual SEC Form X–17A–5
1 15
December 19, 2019.
PO 00000
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
17, 2019, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Exchange filed the proposal as a
‘‘non-controversial’’ proposed rule
change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Sfmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
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reports (‘‘FOCUS Reports’’) 5 must also
file contemporaneous attestations
regarding compliance with the
maintenance and enforcement of
policies and procedures to prevent the
misuse of material, nonpublic
information with such reports. In
addition, the Exchange also proposes to
remove Rule 8.10.03, which provides
that a subset of TPHs that file annual
FOCUS Reports may use Exchangedeveloped OE–418 forms to satisfy the
Rule 8.10 filing and recordkeeping
requirements.6
Current Rule 8.10 provides that every
TPH shall establish, maintain and
enforce written policies and procedures
reasonably designed, taking into
consideration the nature of such TPH’s
business, to prevent the misuse, in
violation of the Securities Exchange Act
of 1934 (the ‘‘Act’’) and Exchange Rules,
of material, nonpublic information by
such TPH or persons associated with
such TPH. It also provides that TPHs
required to file FOCUS Reports on an
annual basis only, pursuant to Rule 7.3
(Financial Reports), must
contemporaneously file, with their
annual reports, attestations signed by
such TPHs stating that the procedures
mandated by Rule 8.10 have been
established, enforced and maintained.
Current Rule 8.10.03 provides that the
Exchange-developed form (OE–418)
may be submitted by a subset of TPHs
that only file annual FOCUS Reports to
satisfy attestation and record keeping
requirements pursuant to Rule 8.10.
Specifically, the Exchange implemented
the attestation requirement for TPHs
that file FOCUS Reports only annually
because those TPHs that file FOCUS
Reports on a more frequent basis (i.e.,
monthly and quarterly) were generally
subject to periodic exams by the
Exchange in which the Exchange
reviewed, among other things, the
procedures maintained by such TPHs
pursuant to Rule 8.10.7 TPHs filing
FOCUS Reports only annually were not
subject to periodic exams by the
5 FOCUS Reports are ‘‘Financial and Operational
Combined Uniform Single Reports’’ and must be
completed by all broker-dealers registered with the
Securities and Exchange Commission (the
‘‘Commission’’). The form reports a broker-dealer’s
financial and operating condition.
6 See Cboe Options Regulatory Circular RG19–
003, which sets forth the criteria for use of form
OE–418: (1) Individual TPHs with no employees;
(2) individual TPHs who employ no more than
three non-TPH employees; or (3) TPH organizations
with no more than three employees who are
nominees and which employ no more than six nonTPH employees. (January 11, 2019).
7 See Securities Exchange Act Release No. 29967
(November 19, 1991), 56 FR 61067 (November 29,
1991) (SR–CBOE–91–41).
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18:44 Dec 26, 2019
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Exchange at the time when Rule 8.10
was originally adopted.
Today, however, all TPHs are subject
to the Exchange’s risk-based exam
process, which is conducted by
Financial Industry Regulatory Authority
(‘‘FINRA’’) on behalf of the Exchange
pursuant to a regulatory services
agreement (‘‘RSA’’). Examinations are
based on an annual risk assessment to
determine the cycle, scope and content
of examinations per firm to ensure each
firm is appropriately examined.8
Moreover, the Exchange may conduct
off-cycle examinations of a TPH, as
necessary.
The Exchange notes that no more than
10 TPHs currently fall under the Rule
8.10 attestation requirement, and that
the Exchange currently collects the OE–
418 forms in accordance with Rule
8.10.03 for those TPHs that submit the
form to satisfy the Rule’s attestation and
record-keeping requirements. As a result
of the proposed rule change, all TPHs
would continue to be subject to the Rule
8.10 recordkeeping requirement, which,
pursuant to Rule 7.1, a TPH must make
available to the Exchange upon request.
The Exchange believes it is an
additional administrative burden to the
limited number of TPHs who are
required to submit an attestation when
all TPHs are now subject to periodic
examination, including review of the
TPHs procedures pursuant to Rule 8.10,
if warranted.
The Exchange further notes that all
TPHs are subject to Rule 8.16, which
provides that, among other things, each
TPH and associated person of a TPH is
required to be under the supervision
and control of appropriately qualified
supervisor, as well as implement
written supervisory procedures and a
system for applying such procedures to
supervise the types of business in which
the TPH engages and to supervise the
activities of all associated persons.
Under paragraph (g) of Rule 8.16, each
TPH must conduct an interview or
meeting with all associated persons,
during which compliance matters
relevant to the activities of the
associated person are discussed. Each
TPH must also conduct an annual
compliance review and written report
on the TPH’s supervision and
compliance effort during the preceding
year and on the adequacy of the TPH’s
ongoing compliance processes and
procedures. The Rule further requires
that the TPH’s Chief Executive Officer
(‘‘CEO’’) (or equivalent officer) certifies
that the TPH has processes in place to:
8 While examinations are on a risk-based exam
cycle, each TPH is examined no less than every
three years.
PO 00000
Frm 00142
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Sfmt 4703
71489
(a) Establish and maintain policies and
procedures reasonably designed to
achieve compliance with applicable
Exchange Rules and federal securities
laws and regulations; (b) modify such
policies and procedures as business,
regulatory and legislative changes and
events dictate, and; (c) test the
effectiveness of such policies and
procedures on a periodic basis, the
timing and extent of which is
reasonably designed to ensure
continuing compliance with Exchange
Rules and federal securities laws and
regulations. Rule 8.16 was adopted by
the Exchange following its adoption of
Rule 8.10, and prior to the adoption of
Rule 8.16 only TPHs approved to
conduct business with the public were
subject to such supervision
requirements.9 The Exchange believes
that the Rule 8.10 attestation
requirement is generally redundant of
the CEO certification requirement in
Rule 8.16.
The Exchange believes that periodic
TPH examinations and supervision
requirements pursuant to Rule 8.16 are
sufficient to ensure TPH compliance
with the requirement to establish
enforce and maintain policies and
procedures to prevent the misuse of
material, nonpublic information. As
noted previously, the Exchange, through
its regulatory services provider, now
conducts periodic risk-based exams of
all TPHs and all TPHs are currently
subject to the supervision requirements
of Rule 8.16. Therefore, the Exchange
believes that the attestation requirement
and accompanying OE–418 form are
redundant of the current exam process
and other Exchange Rules in place, thus,
their proposed removal would lift an
unnecessary additional reporting step
and administrative procedure.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.10 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 11 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
9 See Securities Exchange Act Release No. 71644
(February 18, 2014), 79 FR 13365 (March 10, 2014)
(SR–CBOE–2013–126).
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
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in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 12 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that removing the duplicative and
unnecessary attestation requirement in
connection with Rule 8.10 and 8.10.03
would serve to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and
benefit investors. Specifically, the
Exchange believes that the supervision,
annual report and CEO certification
requirements pursuant to Rule 8.16 and
changes to its examination practices
which subject all TPHs to periodic riskbased examination, both of which were
implemented/adopted after the adoption
of Rule 8.10, are sufficient to ensure that
TPHs have internal processes and
procedures in place for identifying and
preventing misuse of material, nonpublic information. In addition, all
TPHs are currently, and will remain,
subject to the Rule 8.10 recordkeeping
requirement, and they must make such
records available to the Exchange upon
request. Therefore, the proposed rule
change is designed to lift the
unnecessary administrative burden of
the limited number of TPHs who are
required to also attest that the procedure
mandated by Rule 8.10 have been
established, enforced and maintained.
As a result of the above-stated practices
and procedures already in place, the
Exchange believes that removing the
attestation requirement in Rule 8.10
would benefit investors by removing a
duplicative and unnecessary reporting
step and administrative procedure.
Further, the Exchange does not believe
that the proposed rule change would
affect the protection of investors as the
Exchange may at any time require TPHs
to produce records in connection with
maintenance and enforcement of
policies and procedures to prevent the
misuse of material, nonpublic
information, as well as conduct an off12 Id.
VerDate Sep<11>2014
cycle examination of a TPH, as
necessary.
In addition to this, the Exchange also
believes the proposed rule change is
consistent with Section 6(b)(1) of the
Act,13 which provides that the Exchange
be organized and have the capacity to be
able to carry out the purposes of the Act
and to enforce compliance by the
Exchange’s Trading Permit Holders and
persons associated with its Trading
Permit Holders with the Act, the rules
and regulations thereunder, and the
rules of the Exchange. As noted above,
the Exchange currently has the capacity
under other Exchange Rules to be able
to enforce compliance by TPHs related
to submission of appropriate records in
connection with the prevention of the
misuse of non-public information. The
Exchange believes that removing
redundant and unnecessary rules would
allow for the Exchange to be organized
and better able to carry out the purposes
of the Act and enforce compliance.
Removing the Rule 8.10 attestation
requirement would reduce the
administrative burden on the Exchange
in having to collect and maintain
reports that are generally duplicative of
reports required under other Exchange
Rules, and would allow the Exchange to
better allocate regulatory resources.
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 14 and
subparagraph (f)(6) of Rule 19b–4
thereunder.15
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. In particular,
the proposed rule change is not
intended to address competitive issues
but rather is concerned with facilitating
less burdensome and more efficient
regulatory administration. The
Exchange notes that the Rule 8.10
requirement to maintain and enforce
policies and procedures to prevent the
misuse of material nonpublic
information and recordkeeping
requirement of such would continue to
uniformly apply to all TPHs.
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2019–123 on the subject line.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the Proposed
Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
13 15
18:44 Dec 26, 2019
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PO 00000
U.S.C. 78f(b)(1).
Frm 00143
Fmt 4703
Sfmt 4703
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–219–123. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
14 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
15 17
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change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CBOE–2019–123 and
should be submitted on or before
January 17, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019–27873 Filed 12–26–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87801; File No. SR–
NYSEAMER–2019–55]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change, as Modified by Partial
Amendment No. 1, To Amend the Fees
for NYSE American BBO and NYSE
American Trades
jbell on DSKJLSW7X2PROD with NOTICES
December 19, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on December
4, 2019, NYSE American LLC (‘‘NYSE
American’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
On December 17, 2019, the Exchange
filed Partial Amendment No. 1 to the
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Jkt 250001
proposed rule change.3 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as modified by Partial Amendment No.
1, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to (1) amend
the fees for NYSE American BBO and
NYSE American Trades by modifying
the application of the Access Fee; (2)
amend the fees for NYSE American
Trades by adopting a credit applicable
to the Redistribution Fee; and (3) adopt
a one-month free trial for all NYSE
American market data products. The
Exchange also proposes to remove
certain obsolete text. The Exchange
proposes to implement the proposed fee
changes on February 3, 2020. The
proposed change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to decrease
the fees for certain NYSE American
market data products, as set forth on the
NYSE American Equities Proprietary
Market Data Fee Schedule (‘‘Fee
Schedule’’). The purpose of these fee
decreases, taken together with fee
decreases filed by the Exchange’s
affiliated exchanges, New York Stock
Exchange LLC (‘‘NYSE’’) and NYSE
Arca, Inc. (‘‘NYSE Arca’’),4 will reduce
the fees associated with the NYSE BQT
proprietary data product, which
3 In Partial Amendment No. 1, the Exchange
provided an additional example in support of the
proposed rule change.
4 See SR–NYSE–2019–70 and SR–NYSEArca–
2019–88.
PO 00000
Frm 00144
Fmt 4703
Sfmt 4703
71491
competes directly with similar products
offered by both the Nasdaq and Cboe
families of U.S. equity exchanges.
Collectively, the proposed fee decreases
are intended to respond to the
competition posed by similar products
offered by the other exchange groups.
Specifically, the Exchange proposes to
(1) reduce the Access Fees by more than
86% for subscribers of NYSE American
BBO and NYSE American Trades that
receive a data feed and use those market
data products in a display-only format;
(2) provide for a credit applicable to the
Redistribution Fee for subscribers of
NYSE American Trades that use that
market data product for display
purposes; and (3) adopt a one-month
free trial for all NYSE American market
data products. The Exchange also
proposes non-substantive changes to
remove certain obsolete text from the
Fee Schedule. All of the proposed
changes would decrease fees for market
data on the Exchange.
The Exchange proposes to implement
these proposed fee changes on February
3, 2020.
Background
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. In
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues, and also recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 5
As the Commission itself recognized,
the market for trading services in NMS
stocks has become ‘‘more fragmented
and competitive.’’ 6 Indeed, equity
trading is currently dispersed across 13
exchanges,7 31 alternative trading
systems,8 and numerous broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
5 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37495, 37499 (June 29, 2005)
(S7–10–04) (Final Rule) (‘‘Regulation NMS
Adopting Release’’).
6 See Securities Exchange Act Release No. 51808,
84 FR 5202, 5253 (February 20, 2019) (File No. S7–
05–18) (Transaction Fee Pilot for NMS Stocks Final
Rule) (‘‘Transaction Fee Pilot’’).
7 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/. See
generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
8 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsIssueData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
E:\FR\FM\27DEN1.SGM
27DEN1
]]>Agencies
[Federal Register Volume 84, Number 248 (Friday, December 27, 2019)]
[Notices]
[Pages 71488-71491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27873]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87806; File No. SR-CBOE-2019-123]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 8.10 To Remove the Attestation Filing Requirements in Connection
With Trading Permit Holders' Policy and Procedures Regarding the Misuse
of Material, Nonpublic Information
December 19, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 17, 2019, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rule 8.10 to remove the attestation filing requirements in
connection with Trading Permit Holders' (``TPHs'') policy and
procedures regarding the misuse of material, nonpublic information. The
text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to remove the Rule 8.10 requirement that TPHs
that file only annual SEC Form X-17A-5
[[Page 71489]]
reports (``FOCUS Reports'') \5\ must also file contemporaneous
attestations regarding compliance with the maintenance and enforcement
of policies and procedures to prevent the misuse of material, nonpublic
information with such reports. In addition, the Exchange also proposes
to remove Rule 8.10.03, which provides that a subset of TPHs that file
annual FOCUS Reports may use Exchange-developed OE-418 forms to satisfy
the Rule 8.10 filing and recordkeeping requirements.\6\
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\5\ FOCUS Reports are ``Financial and Operational Combined
Uniform Single Reports'' and must be completed by all broker-dealers
registered with the Securities and Exchange Commission (the
``Commission''). The form reports a broker-dealer's financial and
operating condition.
\6\ See Cboe Options Regulatory Circular RG19-003, which sets
forth the criteria for use of form OE-418: (1) Individual TPHs with
no employees; (2) individual TPHs who employ no more than three non-
TPH employees; or (3) TPH organizations with no more than three
employees who are nominees and which employ no more than six non-TPH
employees. (January 11, 2019).
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Current Rule 8.10 provides that every TPH shall establish, maintain
and enforce written policies and procedures reasonably designed, taking
into consideration the nature of such TPH's business, to prevent the
misuse, in violation of the Securities Exchange Act of 1934 (the
``Act'') and Exchange Rules, of material, nonpublic information by such
TPH or persons associated with such TPH. It also provides that TPHs
required to file FOCUS Reports on an annual basis only, pursuant to
Rule 7.3 (Financial Reports), must contemporaneously file, with their
annual reports, attestations signed by such TPHs stating that the
procedures mandated by Rule 8.10 have been established, enforced and
maintained. Current Rule 8.10.03 provides that the Exchange-developed
form (OE-418) may be submitted by a subset of TPHs that only file
annual FOCUS Reports to satisfy attestation and record keeping
requirements pursuant to Rule 8.10. Specifically, the Exchange
implemented the attestation requirement for TPHs that file FOCUS
Reports only annually because those TPHs that file FOCUS Reports on a
more frequent basis (i.e., monthly and quarterly) were generally
subject to periodic exams by the Exchange in which the Exchange
reviewed, among other things, the procedures maintained by such TPHs
pursuant to Rule 8.10.\7\ TPHs filing FOCUS Reports only annually were
not subject to periodic exams by the Exchange at the time when Rule
8.10 was originally adopted.
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\7\ See Securities Exchange Act Release No. 29967 (November 19,
1991), 56 FR 61067 (November 29, 1991) (SR-CBOE-91-41).
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Today, however, all TPHs are subject to the Exchange's risk-based
exam process, which is conducted by Financial Industry Regulatory
Authority (``FINRA'') on behalf of the Exchange pursuant to a
regulatory services agreement (``RSA''). Examinations are based on an
annual risk assessment to determine the cycle, scope and content of
examinations per firm to ensure each firm is appropriately examined.\8\
Moreover, the Exchange may conduct off-cycle examinations of a TPH, as
necessary.
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\8\ While examinations are on a risk-based exam cycle, each TPH
is examined no less than every three years.
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The Exchange notes that no more than 10 TPHs currently fall under
the Rule 8.10 attestation requirement, and that the Exchange currently
collects the OE-418 forms in accordance with Rule 8.10.03 for those
TPHs that submit the form to satisfy the Rule's attestation and record-
keeping requirements. As a result of the proposed rule change, all TPHs
would continue to be subject to the Rule 8.10 recordkeeping
requirement, which, pursuant to Rule 7.1, a TPH must make available to
the Exchange upon request. The Exchange believes it is an additional
administrative burden to the limited number of TPHs who are required to
submit an attestation when all TPHs are now subject to periodic
examination, including review of the TPHs procedures pursuant to Rule
8.10, if warranted.
The Exchange further notes that all TPHs are subject to Rule 8.16,
which provides that, among other things, each TPH and associated person
of a TPH is required to be under the supervision and control of
appropriately qualified supervisor, as well as implement written
supervisory procedures and a system for applying such procedures to
supervise the types of business in which the TPH engages and to
supervise the activities of all associated persons. Under paragraph (g)
of Rule 8.16, each TPH must conduct an interview or meeting with all
associated persons, during which compliance matters relevant to the
activities of the associated person are discussed. Each TPH must also
conduct an annual compliance review and written report on the TPH's
supervision and compliance effort during the preceding year and on the
adequacy of the TPH's ongoing compliance processes and procedures. The
Rule further requires that the TPH's Chief Executive Officer (``CEO'')
(or equivalent officer) certifies that the TPH has processes in place
to: (a) Establish and maintain policies and procedures reasonably
designed to achieve compliance with applicable Exchange Rules and
federal securities laws and regulations; (b) modify such policies and
procedures as business, regulatory and legislative changes and events
dictate, and; (c) test the effectiveness of such policies and
procedures on a periodic basis, the timing and extent of which is
reasonably designed to ensure continuing compliance with Exchange Rules
and federal securities laws and regulations. Rule 8.16 was adopted by
the Exchange following its adoption of Rule 8.10, and prior to the
adoption of Rule 8.16 only TPHs approved to conduct business with the
public were subject to such supervision requirements.\9\ The Exchange
believes that the Rule 8.10 attestation requirement is generally
redundant of the CEO certification requirement in Rule 8.16.
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\9\ See Securities Exchange Act Release No. 71644 (February 18,
2014), 79 FR 13365 (March 10, 2014) (SR-CBOE-2013-126).
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The Exchange believes that periodic TPH examinations and
supervision requirements pursuant to Rule 8.16 are sufficient to ensure
TPH compliance with the requirement to establish enforce and maintain
policies and procedures to prevent the misuse of material, nonpublic
information. As noted previously, the Exchange, through its regulatory
services provider, now conducts periodic risk-based exams of all TPHs
and all TPHs are currently subject to the supervision requirements of
Rule 8.16. Therefore, the Exchange believes that the attestation
requirement and accompanying OE-418 form are redundant of the current
exam process and other Exchange Rules in place, thus, their proposed
removal would lift an unnecessary additional reporting step and
administrative procedure.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\10\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged
[[Page 71490]]
in regulating, clearing, settling, processing information with respect
to, and facilitating transactions in securities, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest. Additionally, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \12\ requirement that the rules
of an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ Id.
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In particular, the Exchange believes that removing the duplicative
and unnecessary attestation requirement in connection with Rule 8.10
and 8.10.03 would serve to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and benefit
investors. Specifically, the Exchange believes that the supervision,
annual report and CEO certification requirements pursuant to Rule 8.16
and changes to its examination practices which subject all TPHs to
periodic risk-based examination, both of which were implemented/adopted
after the adoption of Rule 8.10, are sufficient to ensure that TPHs
have internal processes and procedures in place for identifying and
preventing misuse of material, non-public information. In addition, all
TPHs are currently, and will remain, subject to the Rule 8.10
recordkeeping requirement, and they must make such records available to
the Exchange upon request. Therefore, the proposed rule change is
designed to lift the unnecessary administrative burden of the limited
number of TPHs who are required to also attest that the procedure
mandated by Rule 8.10 have been established, enforced and maintained.
As a result of the above-stated practices and procedures already in
place, the Exchange believes that removing the attestation requirement
in Rule 8.10 would benefit investors by removing a duplicative and
unnecessary reporting step and administrative procedure. Further, the
Exchange does not believe that the proposed rule change would affect
the protection of investors as the Exchange may at any time require
TPHs to produce records in connection with maintenance and enforcement
of policies and procedures to prevent the misuse of material, nonpublic
information, as well as conduct an off-cycle examination of a TPH, as
necessary.
In addition to this, the Exchange also believes the proposed rule
change is consistent with Section 6(b)(1) of the Act,\13\ which
provides that the Exchange be organized and have the capacity to be
able to carry out the purposes of the Act and to enforce compliance by
the Exchange's Trading Permit Holders and persons associated with its
Trading Permit Holders with the Act, the rules and regulations
thereunder, and the rules of the Exchange. As noted above, the Exchange
currently has the capacity under other Exchange Rules to be able to
enforce compliance by TPHs related to submission of appropriate records
in connection with the prevention of the misuse of non-public
information. The Exchange believes that removing redundant and
unnecessary rules would allow for the Exchange to be organized and
better able to carry out the purposes of the Act and enforce
compliance. Removing the Rule 8.10 attestation requirement would reduce
the administrative burden on the Exchange in having to collect and
maintain reports that are generally duplicative of reports required
under other Exchange Rules, and would allow the Exchange to better
allocate regulatory resources.
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\13\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. In particular, the proposed
rule change is not intended to address competitive issues but rather is
concerned with facilitating less burdensome and more efficient
regulatory administration. The Exchange notes that the Rule 8.10
requirement to maintain and enforce policies and procedures to prevent
the misuse of material nonpublic information and recordkeeping
requirement of such would continue to uniformly apply to all TPHs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \14\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2019-123 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-219-123. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule
[[Page 71491]]
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission's Public
Reference Room, 100 F Street NE, Washington, DC 20549 on official
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
the filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
CBOE-2019-123 and should be submitted on or before January 17, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27873 Filed 12-26-19; 8:45 am]
BILLING CODE 8011-01-P
